Euro UP 0.2 pct: It's Germany vs the UK in the Economic Stakes, But Why is EUR Higher in the PM Session?
It was all going so well for Sterling following the release of the ONS, as we see in our 09:32 entry on the live feed.
There is no overt reason for the GBP sell-off, our live feed will bring any information as soon as it is available.
British Pound to Euro: GBP Rallies as UK Data Outdoes German Data
"The UK steps up to Germany today with GDP figures for the second quarter. The second estimate of UK GDP showed an increase to 0.7% in the period versus the first estimate of 0.6%, a welcome upward revision which is consistent with the solid upswing with all other UK macro indicators. All facets of the UK economy have gathered steam; manufacturing, industrial, construction, housing, consumer confidence and the labour market," says Ishaq Siddiqi at ETX Capital.
According to Siddiqi the strong growth in the UK has the market unconvinced that Carney and Co can keep a lid on interest rates until late 2016.
Sterling rejoiced and UK bonds fell – yields still elevated as global growth optimism grows.
UK: Follow-through with good data
Ipek Ozkardeskaya at Swissquote expands on the economic outlook for the UK saying:
"UK’s good economic data stream expanded to the second quarter preliminary GDP, gross capital formation, private consumption, government spending and quarterly export and import numbers.
"UK is now expected to print 0.7% growth in GDP (from 0.6% in Q1), a higher government spending (+0.9% vs. 0.1% prev) and significant improvement in exports (+3.6% vs. -0.1% prev) and imports (+2.5% vs. -2.0% prev) in 2Q.
"Data has been a fresh boost for GBP-bulls (decently hit by BoE hawk Mr. Waele’s dovish comments yesterday). As knee-jerk reaction, GBPUSD spiked to 1.5638, EURGBP dipped to 0.85417. As long as the cable remains above its 200-dayMA (1.5514), the bull-momentum suggests the extension of strength towards our 1.5753 target."
Boris Schlossberg at BK Asset Management says today's news bodes well for the pound, "as the better than expected UK growth figures suggest that the need for further QE has diminished."
German GDP, Quietly Confident
While Germany didn't deliver in the surprise stakes, Europe's largest economy's strength gives crucial insights into the strength of the Euro.
Commenting on Germany's data Ishaq Siddiqi says:
"Onto the German GDP figure – no surprise, confirmed at 0.7% for the second quarter, consistent with stream of good news out of Germany and the rest of the euro zone - ECB member Nowotny reckons there is no reason to dig into the central bank’s tool box or cut interest rates further now that we are seeing signs of growth, led by Germany of course.
"The unchanged number didn’t surprise the market, rather reminded us that the region’s power house is back in shape.
"Music to the ears of Angela Merkel and her Christian Democrat Union party who are slated to comfortably win the September national elections.
"That said, it’s unwise to believe Germany can pull the whole euro zone out of turmoil – peripheral nations must continue on the path of structural reforms/austerity and stay on top of their budget targets with the troika in order to recover but political instability remains a significant threat."